Report to the President: Prescription Drug Coverage, Spending, Utilization, and Prices.. Income

04/01/2000

Table 2-5 and Figure 2-6 show average prescription drug spending and average out-of-pocket spending for Medicare beneficiaries by income.8 Average spending for people with coverage is consistently higher than for people without coverage across income groups.9 It might be expected that spending differences would diminish steadily with higher income, because higher-income people without coverage are better able to pay for drugs on their own. The difference in average spending for covered and noncovered beneficiaries in poverty is indeed greater than for other income groups. However, among the higher income groups, there is no significant difference in the size of the spending gap between covered and noncovered beneficiaries. This suggests that insurance coverage for prescription drugs matters, irrespective of income.

Table 2-5. Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Family Income as a Percent of Poverty, 1996
Income as a percent of poverty Covered Not Covered Ratio, Covered/ Not Covered
Average Total Spending Average Out-of-pocket Spending Out-of-pocket as % of Total Spending Average Total Spending (all out-of-pocket) Average Total Spending Average Out-of-pocket Spending
Total $769 $253 33% $463 1.66 0.55
<Poverty $800 $200 25% $368 2.18 0.54
Poverty-135% $767 $269 35% $476 1.61 0.57
136-150% $673 $272 40% $555 1.21 0.49
151-175% $790 $279 35% $453 1.74 0.62
176-200% $791 $255 32% $512 1.54 0.50
201-300% $778 $284 36% $487 1.60 0.58
301-400% $782 $264 34% $453 1.72 0.58
>400% $717 $248 35% $525 1.37 0.47
Source: Information and Methods Group, Office of Strategic Planning, Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)): Medicare Current Beneficiary Survey Cost and Use File, 1996.

Figure 2-6. Out-of-pocket and Insurer Spending on Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Income, 1996

Figure 2-6. Out-of-pocket and Insurer Spending on Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Income, 1996

Source: Information and Methods Group, Office of Strategic Planning, Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)): Medicare Current Beneficiary Survey Cost and Use File, 1996.


Among covered beneficiaries, those below the poverty threshold pay the smallest share of their own costs out of pocket. Poor beneficiaries are more likely to have drug coverage through Medicaid, which imposes only nominal copayments. Still, even with drug coverage, beneficiaries in poverty paid 25 percent of their own costs. This may be partly because people are counted as covered if they have coverage for any part of the year. The out-of-pocket costs might have been incurred by part-year eligibles during a period without coverage. Another possible factor is the fact that some state Medicaid programs limit the number of prescriptions beneficiaries may receive in a given period.

Table 2-6 shows spending by income for the non-Medicare population. Again, it is helpful to look at people who used any prescription drugs, rather than at the total population. Among users, patterns for the non-Medicare population are similar to those shown in Table 2-5 for the Medicare population as a whole. In all income ranges, there is a difference between spending by those with coverage and those without.10 Like Medicare beneficiaries, covered non-Medicare beneficiaries pay the smallest share of their own costs – just over a fourth – when they are in poverty. However, actual out-of-pocket spending for drug users in this group is only $76 on average, as opposed to $200 for covered Medicare beneficiaries in poverty.

Table 2-6. Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Non-Medicare Individuals with and without Drug Coverage, by Family Income as a Percent of Poverty, 1996
Income as a percent of poverty Covered Not Covered Ratio, Covered/ Not Covered
Average Total Spending Average Out-of-pocket Spending Out-of-pocket as % of Total Spending Average Total Spending (all out-of-pocket) Average Total Spending Average Out-of-pocket Spending
Total non-Medicare population $222.01 $80.59 36% $58.94 3.77 1.37
<Poverty $191.14 $49.64 26% $62.18 3.07 0.80
100-200% $195.96 $76.98 39% $63.45 3.09 1.21
200-400% $210.66 $79.10 38% $51.33 4.10 1.54
>400% $252.34 $93.58 37% $61.36 4.11 1.53
             
People using prescription drugs $317.64 $115.30 36% $172.64 1.84 0.67
<Poverty $291.65 $75.74 26% $176.60 1.65 0.43
100-200% $285.74 $112.26 39% $187.13 1.53 0.60
200-400% $305.98 $114.89 38% $156.70 1.95 0.73
>400% $346.89 $128.65 37% $172.10 2.02 0.75

Note: The totals include persons with negative family income.

Source: Center for Cost and Financing Studies, Agency for Healthcare Research and Quality: Medical Expenditure Panel Survey Household Component, 1996.

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